Rental Property Buying & Selling Rights
Understand your rights when buying or selling residential rental property in Baltimore City
You might assume that buying or selling a single-family residential rental property in the City of Baltimore is a straightforward process, not unlike selling an owner-occupied home.
However, many landlords and tenants are surprised to learn that such transactions require several intricate steps mandated by the Tenant Opportunity to Purchase Act (TOPA), as outlined in the Subtitle 6 of Article 13 of the Baltimore City Code.
The procedures required of the landlord and tenant, by TOPA (also called Tenant’s Right of First Refusal), can seem daunting, especially considering that failure to follow the code can not only invalidate a sale but also result in criminal penalties.
TOPA gives tenants the right of first refusal at buying the home they live in should the owner decide to sell or transfer the property. For tenants, TOPA provides them with the opportunity to purchase the property they live in on terms considered reasonable in their residential real estate market. For landlords, this means the validity of any sales contract with a third party (i.e., not the tenant) depends on compliance with procedures set out in TOPA.
At Lusk Law, LLC, we have helped rental property owners and tenants comply with TOPA. If you need legal advice about buying or selling your rental property, contact our office at 443-535-9715.
Tenant’s Right of First Refusal Step-by-Step
The process often begins with the landlord sending the tenant a written offer of sale, stating the sale price as well as the terms and conditions of the sale being agreed to by the landlord and a third party. This notice must be sent via postage prepaid first-class mail, and the landlord must obtain a receipt from the post office that the notice was sent. At the same time, the landlord must also send a copy of the offer to Baltimore’s Department of Housing and Community Development.
To accept the landlord’s offer, the tenant must respond within 30 days of the date the landlord mailed the offer. They, too, must send their response by first class mail, postage prepaid, and obtain a receipt of the mailing from the post office. Note that if the tenant plans to use a government program to assist in financing or insuring the purchase, this must be indicated at this time.
Sometimes a landlord will enter into a sales contract before mailing a sales offer to the tenant or during the 30-day notice period. Under these circumstances, the landlord must mail a notice of the contract to the tenant. Then the tenant has 30 days to notify the landlord of their intent to purchase the property for at least as much as the amount stated in the contract.
If the 30-day offer period with the tenant has expired and the landlord enters into a sales contract that is either less than what was initially offered to the tenant or materially more favorable to the buyer, the landlord must notify the tenant and give the tenant 15 days from the date of the mailing of the notice to exercise the tenant’s right of first refusal. Note that if it has been more than six months since the date of the first offer, or if the net proceeds of the third-party contract are less than 80% of the first offer to the tenant, the tenant has 30 days (instead of 15 days) from the date of mailing to notify the landlord of their intent to purchase the property.
If the tenant notifies the landlord of the tenant’s intent to purchase the property, the landlord has 10 days to offer the tenant a signed sales contract, and the tenant has 10 days to sign and return the sales contract (along with the required deposit) to the landlord. If the tenant intends to use a government program to help with the purchase, the required deposit may not be greater than that required by that government program. If the tenant does not use such a program, then the deposit may not be more than 7% of the sale price.
TOPA also contains rules about settlement dates. For example, the settlement may not be less than 60 days (and in some cases 90 days) after the tenant signs the contract. Also, the sales contract must release the tenant if they cannot procure adequate financing by the settlement date.
TOPA does contain certain exceptions, such as transfers to relatives, transfers from estates, and open market sales where the property is listed with a third-party licensed real estate agent and certain requirements are met.
Protect Your Legal Interests
Lusk Law, LLC, has experience working with buyers and sellers of tenant-occupied homes. Because the series of steps can be complicated, many tenants and landlords prefer working with an attorney knowledgeable in this area. Lusk Law, LLC, can handle the entire process to make sure that everything is completed according to code. Contact our office at 443-535-9715 if you need legal advice about TOPA/Tenant’s Right of First Refusal.
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